Business Secretary Peter Kyle has confirmed that “hundreds of millions of pounds” from the government’s £2.5bn steel fund have already been spent just to keep British Steel and Liberty Steel operational. This financial drain comes as he simultaneously backs a capital-intensive shift to electric arc furnaces (EAFs) at the Scunthorpe plant.
The admission raises serious questions about the remaining budget for the industry’s much-needed modernisation. The £2.5bn, a key election manifesto promise, was intended for strategic investment. Its depletion on day-to-day operations suggests less money will be available for the massive capital expenditure required to build new EAFs.
Despite the financial constraints, Kyle appears determined to push the green transition forward. When asked if he thought Scunthorpe would get electric arc furnaces, he responded, “I do.” This signals a clear intention to move away from the site’s current carbon-heavy blast furnaces as part of a new steel strategy due in December.
This move is being positioned as a necessary response to a “slew of crises” in the global steel market, including trade tariffs and oversupply from China. However, the switch is fraught with challenges, not least the thousands of jobs linked to the old blast furnaces, which are now at risk.
Industry lobby groups, like UK Steel, have welcomed the “clear future vision” but stressed that new furnaces alone are not a silver bullet. The director, Frank Aaskov, stated the industry desperately needs a “stronger business environment,” specifically citing the need for lower power prices and robust trade policies to survive, regardless of the technology used.